SHANGHAI: A China regulator has accused Alibaba Group Holding Ltd of failing to clean up what it called illegal business deals on the e-commerce titan's platforms, in an unusually strong government criticism of one of the country's biggest private firms.
The State Administration for Industry and Commerce (SAIC), in a report published on its website on Wednesday, said many products sold on Alibaba's e-commerce websites and services infringed upon trademarks, were substandard or fake, were banned or endangered public security.
The report was later removed from the main page of the SAIC website. An Alibaba spokesman declined to provide immediate comment. SAIC said the report summarised a July 16, 2014, meeting between government business regulators and Alibaba, and that it had delayed releasing the report to avoid affecting the e-commerce firm's initial public offering, which took place in September.
SAIC did not elaborate. Alibaba, which raised a record-setting $25 billion from its New York IPO, is due to release its quarterly results on Thursday.
"Alibaba Group has long paid insufficient attention to the illegal business activities on Alibaba platforms," the SAIC report said. Alibaba "let that abscess fester until it became a danger", it added.
The report said Alibaba officials, for their part, pledged during the July meeting to take the necessary steps to rectify the problems. The SAIC has a broad supervisory role over online trading platforms and business in China.
Alibaba, which until a few years ago was on a US list of "notorious markets" for intellectual property infringement, has fought hard to tackle counterfeit products to keep its reputation from being tarnished in the run-up to the IPO, the world's biggest ever listing.
Online fakes, however, remain a big problem in China. Joe Simone, director of Hong-Kong based intellectual property consultancy SIPS, said the regulator's accusations of counterfeit goods were no surprise.
"The frankness of the report and its condemning tone are unprecedented and speak volumes about what the SAIC found in its inspection," he added.
In the report, the regulator said Alibaba had misled consumers during sales events, including its popular Nov. 11 annual "Singles Day" shopping extravaganza. At last year's event, which was a few months after the IPO, Alibaba reported a surge in sales transactions to a record high of $9 billion.
Merchants told Reuters in November they felt pressure from Alibaba's Tmall to boost their figures on Singles Day with heavy discounts and delayed recognition of earlier sales.
"Network operators must enhance awareness of their problems, face the problems," the SAIC report said. "There are no special market players before the law.
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